The Central Electricity Regulatory Commission (CERC) has issued an order stating that the enactment of GST laws is covered as Change in Law under Article 12 of the power purchase agreements (PPAs).”

The CERC issued the order while responding to separate petitions. The petitions were filed under Section 79 of the Electricity Act, 2003 read with Article 12 of the PPAs executed between the petitioners and respondents, for seeking approval of Change in Law events due to the enactment of the GST laws.

The first petition was filed by Prayatna Developers Private Limited against National Thermal Power Corporation (NTPC), Jaipur Vidyut Vitran Nigam Ltd., Ajmer Vidyut Vitran Nigam Ltd., Jodhpur Vidyut Vitran Nigam Ltd., and the Ministry of New and Renewable Energy (MNRE). Another petition was filed by Azure Power Venus Private Limited against Solar Energy Corporation of India (SECI) and Uttar Pradesh Power Corporation Limited (UPPCL).

Key Requests Made by Petitioners

Prayatna developers had petitioned the CERC to declare that the imposition of the Integrated Goods and Services Tax, 2017, Central Goods and Services Tax, 2017 and Rajasthan Goods and Services Tax, 2017 come under Change in Law under Article 12 of the PPA.

Prayatna developers had also requested the CERC to restore the petitioners to the same economic condition before the occurrence of the Changes in Law by way of adjustment in tariff in terms of Article 12 of the PPA by increasing the tariff as prayed for in the present petition and to pass such other and further order under the facts and circumstances of the present case.

Azure Power had requested CERC to declare that the promulgation of the Integrated Goods and Services Tax, 2017, the Central Goods and Services Tax, 2017 and the Uttar Pradesh Goods and Services Tax, 2017 with effect from 01.07.2017, are all Change in Law events under Article 12 of the PPA dated 21.10.2016 and executed between the petitioners and the respondent.

Azure had also requested CERC to direct a lump sum compensation of ₹65,040,687 (~$900,250) to be paid to the petitioners by the respondent in lieu of the additional tax burden on the engineering, procurement and construction cost, as elaborated in the instant Petition, and a monthly levelized tariff payment of ₹0.02 (~$0.00028)/kWh towards the additional tax burden on operation and maintenance expenses incurred by the petitioners due to promulgation of the Integrated Goods and Services Tax, 2017, the Central Goods and Services Tax, 2017 and the Uttar Pradesh Goods and Services Tax, 2017.

Azure had also requested the CERC to direct the respondent to pay the petitioner an additional tariff of ₹0.28 (~0.00390)/ kWh with effect from the commercial operation date of the petitioner’s solar power generating systems as compensation for the additional tax burden incurred by the petitioners on establishing and running the project.

CERC’s Final Order

The enactment of GST laws is covered as Change in Law under Article 12 of the PPA.

With regard to claims made during the construction period, the petitioners have to exhibit clear and one to one correlation between the projects, the supply of goods or services and the invoices raised by the supplier of goods and services backed by auditor certificate.

The claim of the petitioners because of the additional tax burden on operation and maintenance (O&M) expenses (if any), is not maintainable.

The relief for Change in Law is allowed as a separate element on a one-time basis in a time-bound manner.

The CERC thus disposed off the petitions. This order clarifies the terms of relief for solar PV projects that were affected due to the sudden change in taxation due to the advent of GST regime in India.

Mercom previously reported that the delay in GST reimbursement and lack of clarity is affecting solar project developers in India. Recently, the MNRE issued an order extending the commissioning date of solar PV projects that were affected after the imposition of GST and other related issues.